1 – You guessed your selling prices, not calculated them
If you’ve guessed your prices, meaning that you’ve looked at your handmade items thinking: “You know what? I think it’s worth $39, and that’s what I’m going to sell it for”, then you’ve probably underestimated, and I want you to raise your prices. Don’t sell yourself short.
2 – You based your prices on opinions of people who are not your target market
Maybe you’ve asked your family, friends, or in a Facebook group how much you should charge for your handmade items or you have asked them how much would they would be willing to pay. The problem is, they are not your target audience. If they want to pay $10 or $100 for an item shouldn’t matter. What matters is how much it cost you to make it and how much would your ideal customer pay for it. Market research is also important here. That customer is likely not in another Facebook group for makers or Etsy sellers, so make sure you’re not basing your prices on opinions.
3 – You’ve just used the pricing calculator and realized you were missing a few important elements in your pricing formula
I have a free pricing calculator that can help you price your handmade items here. If you use it and find out you’re missing some of the important pieces in your pricing, like time spent per hour, PayPal fees, overhead costs, free shipping, or the cost of supplies, you should raise your price points to account for that.
Grab this free handmade pricing calculator!
use this “done for you” handmade pricing calculator to know exactly how much you should charge for your products.
4 – You’re not paying yourself more than minimum wage as an hourly rate
If you are working the equivalent of a full-time job or more on product creation, packaging and sending orders – but you’re still not making enough per hour to meet your revenue/profit goal – you’re undercharging for your handmade items, and this story has no pretty ending. You need to raise your prices now or you will burn out and your business will never grow.
5 – You don’t use perceived value in your pricing formula
Perceived value is what people perceive the value of your brand and handmade items to be. It doesn’t necessarily reflect the total cost of your product, but more what they are willing to pay for it. Why do you think Chanel can sell their bags for $2000? Do you think it costs them $1000 to produce them? Heck no. It’s brand experience, packaging, and how the experience of shopping with them makes you feel.
Sometimes for the customer, the fact that you have higher prices is a sign of higher quality. Your overhead cost to make your product isn’t the only factor to your pricing formula. That’s why by raising your prices you can actually make more sales.
6 – If you were to sell your products to wholesalers, you wouldn’t make money
As a test, divide your prices by 2 and imagine that’s the wholesale price for buying your handmade items from you. They then sell them at their retail price. Would you still make a good hourly rate? Are you losing money? Neutral? Making money? The reason I’m asking about that is that a lot of shops set their retail prices closer to what their wholesale price should be. Are you one of them? Even if you’re not thinking of selling to wholesalers, that’s a handy test to help you determine if you’re not charging enough for your products. If you’re not making money if you divide your prices by 2 and selling that, you need to raise your base price by 2, at least.
7 – You’re hurting the handmade community
Made in China is not handmade and always keeping low retail prices for similar items makes it very hard for the community as a whole to raise the the minimum base price of handmade items. Repeat after me: handmade items are not cheap. It’s actually the opposite of that! People who shop handmade items for the good reasons, are actually are your ideal customers, understand that. Many people are willing to pay more for handmade items. By keeping your prices as low as possible you’re doing a disservice to the community in general because it’s harder for business owners and Etsy sellers to raise their prices. It’s also confusing for the customers when they see similar items for $5, $30, and also for $60. Keep in mind, they don’t know that the person who has a $5 handmade item doesn’t make any money, you selling the product for $30 are just breaking even, and someone out there is trying to sell your product for $60 because that’s the price it should be. So please, as a community, let’s raise our prices so we can stop attracting customers that are better off shopping retail prices on Amazon.
The last thing I need you to hear is this: YOU ARE WORTH IT! Most of the times pricing issues come from uncertainties and doubts about ourselves and our work. You are talented, you have a gift that no one else has (yes, same skills maybe, but each design is unique to you), you work hard, and your products are beautiful. You are worth it. Raise your prices.
What do you feel your pricing strategy is doing for you at the moment? Is it working? Do you need to raise your prices? Comment below, I’d love to know!
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